I spent a lot of time discussing tax reform yesterday. One of the issues I discussed, more than once, was how overdue tax reform is in the U.K.

Look at the age of U.K. taxes in their current forms.

Income tax in its current largely PAYE form was created in the 1940s.

So too was National Insurance.

Corporation tax and capital gains tax arrived in 1965.

VAT hit these shores in 1973.

Inheritance tax (in the form of capital transfer tax) is a mid 70s creation.

Stamp duty and excise duties are older. So too, in reality, is Council Tax, which is simply rates updated a bit.

I accept we have had some minor new taxes since the 70s. But they are minor. Stand back and what you see is either a tax system so perfectly formed that it can meet the needs of the economy come what may or, alternatively, a tax system so chronically out of date and so ill matched to the economy and society that we now live in that reform is long overdue.

Totally agree Richard. I believe the key to the problem is that we always ask what changes we need to make to the tax system and never ask what tax system we need.

I believe there is a body called something like “the office for tax simplification”. I don’t know what it’s for but if it really wants to be useful, what it really needs to do is put the yellow and orange books back on the shelf, take a blank sheet of paper and design a tax system that is fit for purpose now and for the reasonably foreseeable future.

Only once this has been done should they address the question of how we get from here to there.

Thank you for this, Richard. I believe that, almost as much as there is a requirement to change public understanding of economics (money creation, tax and spend etc); there is an urgent need fundamentally to reform taxation. As your list of dates implies, tax policy does not reflect the changes to the dynamics of modern economic activity. The thinking is ossified. Unlike you I am no expert on tax, but outside your own views, I know of little that seems to me to be offering innovative ideas. Perhaps I am looking in the wrong places.

In any case I would like to draw attantion to two historic turning points:

1) Income Tax. Pitt first imposed it in 1799, as a wartime exigency. It was abolished in 1816. Peel-Gladstone re-imposed it in 1842, again as a temporary measure. This is the level of thinking, and the age of thinking we are dealing with. Age alone does not mean the measure does not make sense; but in any other area, it would certainly be closely and regularly be reviewed and challenged.

2) In 1911 Asquith-Lloyd George introduced AGR (LVT) into the Finance Bill. It was defeated in the House of Lords by the landed interest (effectively against the business interest in the House of Commons). It provoked a constitutional crisis. The result was that the House of Lords would never again vote against a Finance Bill. But the AGR proposal was lost, soon after the world was at war; and the taxation of land disappeared. It has never been seen again and the rentiers have been feasting ever since on a free lunch, based only on possession.